Imagine sitting down at a restaurant, ordering a burger, and getting your bill for $10. Your friends at the table ordered the same thing, but when their bills arrive, you notice one friend is charged $4.50, and another is asked to pay $250.
You all shake your heads at the discrepancy, grumble a little bit–and then pay for your burgers as charged.
Now, while this scenario in food service seems completely ridiculous, it’s what plays out every day in our healthcare system. Different people are charged differently for the exact same services.
A study, conducted by JAMA Internal Medicine in August 2017, analyzed 12,337 emergency medicine physicians from 2,707 hospitals and 57,607 internal medicine physicians from 3,669 hospitals in all 50 states to examine the variation in excess charges.
The results were pretty astounding:
Emergency department docs had an overall markup ratio of 4.4 (that equates to 340 percent excess charges past what Medicare pays). That’s beyond the markup ratio of 2.1 (110 percent excess charges) for all services performed by internal medicine physicians.
Hospitals marked up all emergency department services in a massive range between 1.0 to 12.6, with a median markup ratio between 4.0 and 5.0. Don’t get cut; laceration repair had the highest median markup ratio at 7.0. And it’s a roll of the dice for a CT scan, with hospitals charging vastly different fees for the scan (ranging between 1.6 and 27.7).
Compared with internal medicine departments at hospitals, markups in the ED were often substantially higher–for the same services.
In a study announcement, Dr. Martin Makary, professor of surgery at the Johns Hopkins University School of Medicine summarized: “There are massive disparities in service costs across emergency rooms and that price gouging is the worst for the most vulnerable populations. This study adds to the growing pile of evidence that to address the huge disparities in health care, health care pricing needs to be fairer and more transparent.”
Using ZIP codes and socioeconomic data of the hospitals in question, researchers were also able to deduce that “inequality is then further compounded on poor, minority groups, who are more likely to receive services from hospitals that charge the most,” as Makary said.
Transparent Medical Markets and Payment Integrity are some of the main components of the Health Rosetta, which guides how Captiva Benefit Solutions helps employers side-step the never-ending healthcare cost increases and push back against inequities like those found in this study.
In order to control costs, you have to have a clear expectation of what the providers will charge. A transparent price must include the full bundle of services that wrap around it. Having absolute assurance and agreement on what comes with the price, as well as tackling fraud and ensuring claims are paid correctly, is essential to keeping costs down.
Since we know that hospitals are just throwing numbers around when it comes to charging for services, it’s all the more important that organizations have the tools necessary to advocate for honest, competitive and consistent pricing.
You can learn more about Transparent Medical Markets by getting the free book, The CEO’s Guide to Restoring the American Dream–or by contacting us at Captiva.